SYNACOR INC.,HAMBURG vs. ACIT, INT.TAX. CIRCLE- 3(1)(2), DELHI
आयकर अपीलीय अिधकरण
िदʟी पीठ “डी”, िदʟी
ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं
ŵी नवीन चंū, लेखाकार सद˟ के समƗ
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “D”, DELHI
BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER &
SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER
आअसं.1802/िदʟी/2025(िन.व. 2018-19)
Synacor INC.
485, Sunset Drive, Office #114, Hamburg,
NY 14075
PAN: AAXCS-8643-K
...... अपीलाथᱮ/Appellant
बनाम Vs.
Assistant Commissioner of Income Tax,
International Taxation, Circle 3(1)(2),
Civic Centre, Minto Road, New Delhi 110002
..... ᮧितवादी/Respondent
अपीलाथᱮ Ȫारा/ Appellant by : Shri Deepak Chopra, Ms. Priya Tandon &
Ms. Seetal Kandpal, Advocates
ŮितवादीȪारा/Respondent by : Shri M.S Nethrapal, CIT(DR)
सुनवाई कᳱ ितिथ/ Date of hearing
:
16/10/2025
घोषणा कᳱ ितिथ/ Date of pronouncement :
:
16/10/2025
आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the assessment order dated
15.01.2025, passed u/s. 147 r.w.s 144C(13) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’), for Assessment Year 2018-19. 2. Shri Deepak Chopra, appearing on behalf of the assessee at the outset submitted that though the assessee has raised multiple grounds of appeal, however, the effective grounds assailing the addition by treating sale of software licenses as Fee for Technical Services (FTS) are ground no. 8, 10 & 16 of appeal.
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The ld. Counsel explaining facts of the case submitted that the assessee company was incorporated in USA in the year 2002. The assessee is engaged in providing software licenses and maintenance support services worldwide, including
India. The assessee is cloud based software and service company serving global video, internet and communication providers, device manufactures, Government &
Enterprises. The assessee has entered into agreement with various distributors in India who are engaged in sale of software to Indian customers. During the year under consideration, the assessee received payment of Rs.10,87,45,153/- from Indian distributors on sale of software licenses and the same was claimed as exempt by the assessee. The case of the assessee is that the payment received by the assessee is for the use for copy righted article and not for copy right.
Accordingly, the payments received by the assessee from its Indian customer is neither taxable as royalty nor Fee for Included Services (FIS) as per Article 12 of India-US DTAA. The ld. Counsel for the assessee referred to page no. 498 of the paper book Vol. I, where in the summary of the income from grant of license to use software for the impugned assessment year is tabulated, the relevant extract of same is reproduced herein below:-
Sr.No Customer Name
PAN
Income Offered to tax (INR)
TDS deducted
(INR)
1
Bag
Films
&
Media
Limited
AAACB3416C
1,58,489
-
2
Ingram Micro India P. Ltd.
AABCT1296R
3,52,32,207
45,37,015
3
Software One India P Ltd.
AAOCS6228H
1,71,61,213
14,12,816
4
Crayon Software Experts
India P Ltd
AAFCC6808E
42,33,279
1,14,708
5
Amtrak Technologies P
Ltd
AAACA5962C
4,27,96,603
44,33,106
6
Amtrak Technologies P
Ltd: for Sanvei Overseas
Pte. Ltd.
AAACA5962C
32,13,622
-
7
Innefu Labs P Ltd.
AACCI4292B
32,325
-
8
Wipro Ltd
AAACW0387R
12,60,675
-
3
9
Impiger Technologies P
Ltd
AABCI2651M
45,65,740
Total
10,87,45,153
1,04,97,645
The ld. Counsel submits that the Assessing Officer (AO) in draft assessment order has observed that factual matrix in the impugned assessment year is same as that of assessment year 2021-22. The findings for assessment year 2021-22 were mutatis mutandis applied by the AO to the instant assessment year. The AO did not give his independent findings for AY 2018-19 and reproduces the entire assessment order for AY 2021-22 and made addition of Rs. 10,87,45,153/- holding receipts from sale of software as FTS/FIS under the provisions of Income Tax Act and also under India-US DTAA. The ld. Counsel submits that in the impugned assessment year i.e. AY 2018-19, the receipts are only from sale of software licenses, whereas in AY 2021-22, the assessee had receipts from two segments i.e. (i) sale of software licenses, and (ii) maintenance and support services. The AO has erred in invoking the provisions of Article 12(4)(a) and (b) of India-US DTAA. The provisions of Article 12(4)(a) cannot be invoked as the receipts are not in nature of royalty in the light of decision rendered by the Hon’ble Supreme Court of India in the case of Engineering Article 12(4)(b) does not get attracted as ‘The make available’ condition is not satisfied qua receipts from sale of software licenses. 4. Per contra, Shri M.S Nethrapal representing the department vehemently defended the impugned order. The ld. DR submits that it is not simplicitor sale of licenses nor it can be classified as subscription services. The software sold by the assessee to the end users is customized software and only merely a shrink wrap software. He further submits that the receipts on sale of software also includes
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receipts for support and maintenance services. The assessee is charging comprehensive amount for sale of software plus support and maintenance services.
5. Both sides heard, orders of the authorities below examined. The assessee in appeal has restricted his arguments only to ground no. 8, 10 and 16 of appeal. The same are reproduced herein below:
“8. That the Respondent/ Dispute Resolution Panel ("DRP") erred on facts and in law in not appreciating that receipts in the hands of the Appellant for provision of software licences and rendition of maintenance and support services could not be characterised as FIS, under Explanation 2 to section 9(1)(vii) of the Act and Article
12(4) of the Double Taxation Avoidance Agreement between India and United
States of America (India – USA
That on facts, the Respondent/ DRP did not appreciate that training did not entail transfer of specialised knowledge or skill of a technical nature, for it to qualify as a technical service. 11. That the Respondent/ DRP erred in law in concluding satisfaction of the make available condition under Article 12(4)(b) of the India - USA DTAA, without specifically stating how provision of software licences and rendition of maintenance and support services by the Appellant enabled the users thereof to apply such technology.” 6. The contention of the assessee is that during the period relevant to assessment year under appeal, the assessee has only received consideration on sale of software licenses. The assessee is a US based company. The list of end users to whom software licenses have been sold in India has been tabulated herein above in para 2. Purportedly, there are no receipts on account of maintenance and support services during the relevant period.
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7. We find that the AO has not carried out any independent exercise to identify the source of receipts of the assessee in India during the impugned assessment year and has solely relied on the assessment order passed for AY 2021-22, stating that the factual matrix in both assessment years is same. The ld. DR has asserted that the consideration received by the assessee on sale of software licenses include consideration for support and maintenance services. A specific query was made by the Bench to the DR to show from the assessment order, the proportion of receipts from sale of software licenses and support maintenance services. The ld. DR was unable to answer the query. We are of considered view that neither the AO nor the DRP has undertaken the excise of examining the transaction of sale of software of licenses in the impugned assessment year. Though, the reliance has been placed on the assessment order for AY 2021-22, wherein two different segment of receipts i.e. software sale and maintenance and support services have been dealt with. The ld. DR has contended that the consideration received by the assessee during the relevant assessment year on sale of software includes consideration for support and maintenance, however, could not specify the quantum of receipts under the respective segments. Taking into consideration entire facts of the case, we are of considered view that this issue needs to be re-examined by the AO. The Assessing
Officer shall re-examine the issue and thereafter record his findings based on facts of the impugned assessment year and especially with regard to the nature of transaction in the impugned assessment year clearly specifying; whether the receipts are for sale of software licenses or maintenance & support services or both, and shall also clearly brining out the consideration received by the assessee under each of the segments, if they are more than one. The AO shall pass the order de-novo after affording reasonable opportunity of making submissions to the assessee, in accordance with law.
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9. In the result, impugned order is set aside and appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on Thur ay the 16th day of October,
2025. (NAVEEN CHANDRA)
(VIKAS AWASTHY)
लेखाकार सद᭭य/ACCOUNTANT MEMBER
᭠याियक सद᭭य/JUDICIAL MEMBER
िदʟी/Delhi, ᳰदनांक/Dated 16.10.2025
NV/-
ᮧितिलिप अᮕेिषतCopy of the Order forwarded to :
1. अपीलाथᱮ/The Appellant ,
2. ᮧितवादी/ The Respondent.
3. The PCIT/CIT(A)
4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी
5. गाडᭅ फाइल/Guard file.
BY ORDER,
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(Asstt.